Vision and Strategy
Bakkafrost’s vision is to offer its customers value-added healthy quality products through long-term relationships with its partners. Bakkafrost wants to build its operations on sustainable raw materials and resources.
Bakkafrost’s main strategic goal is to be an independent company securing long-term sustainable growth with efficient and cost-effective production.
Based on the Group’s experience and history, biological security is acknowledged to play an important part in the upstream production of salmon to achieve cost efficiency. Hence, the focus on biological security is given the highest priority within the Group. Through its experience from many years of salmon farming in the Faroe Islands and the results from veterinary and biological best practices, Bakkafrost aims to produce quality salmon products through balancing the production volumes between economies of scale and biological capacities.
Downstream, Bakkafrost’s long-term growth and financial stability is a result of a strategy based on a mix of contract sale of value added products and spot sale of whole gutted fish.
The Group’s long-term fundamental goals for a healthy, attractive and competitive low-cost salmon farming group are to be secured through:
- Control of the entire value chain, from smolt to retail product
- Utilisation of the benefits from the unique geographical placement of the farms
- Implementation of and non-stop development of best veterinary-, biological- and sustainable practices
- Implementation of best practices regarding quality assurance and traceability
- Utilisation of economies of scale through increased size of the harvested fish
- The offering of both value added products as well as whole salmon in order to meet the specific demands of each main market
Bakkafrost’s strategic goals shall be achieved through the following main operational strategies:
Bakkafrost aims to keep the salmon in a good and healthy environment, ensuring the welfare and well being of its fish. All natural and physiological needs must be met to the greatest extent possible in order to maintain a healthy sustainable production and reach cost efficiency.
The fish farming operations must be conducted in strict compliance with the directives and regulations of the Faroese food safety administration, which ensures that the Group’s fish flourish and grow under the most natural conditions possible.
Since the new veterinary model was introduced on the Faroe Islands in 2003, Bakkafrost has experienced very little loss due to disease, a significantly improved feed conversion ratio, lower mortality rates and increased productivity without the use of antibiotics.
The low weight and high mortality in 2002 was a result of disease and early harvesting on the remaining fish in order to prevent the disease from spreading. The average harvest weights have increased from a historical low average weight in the 2001 generation and a high mortality of approximately 30% to an average weight of around 6 kg in 2011 and a mortality of approximately 7%. The strong biological performance has provided the possibility of harvesting larger fish, reducing the feed costs per kilo to an average of approximately 1.12 on average in the Faroe Islands.
Best practice – Human resources
The Group shall maintain its focus on human capital and high work satisfaction in order to keep the competence in-house and benefit from their expertise in all parts of the process. The Group Human Resource department is managed by a HR Manager and has 5 employees. The annual turnover of staff is 1–3% in the farming division, 3–10% in the harvesting division and 10–20% in the processing division. Sales and management have had no changes in staff during the recent year.
The managers of the farming sites have extensive experience, with most of them working since the beginning of the ’90s and some working since the mid ’80s, contributing to the strong results within the farming division. On the high end, the processing division hires a lot of younger personnel looking for short-term employment, typically 1–2 years, hence the higher turnover ratio. The Group is continuously working on improving the work satisfaction within the entire value chain.
The Group shall maintain a strong focus on production and cost efficiency, realising economies of scale within the limits for biological sustainable farming. Key parameters are:
Share, maintain and implement best practices in feeding regimes and husbandry
Continue to monitor and evaluate the various steps within the processing in order to utilise production capacity and find potential for improvements
Reward the ideas for new methods improving economy of scale and maintain/increase quality of products
Value added production
In 2009, value added products (VAP), as e.g. portions and fillets, represented 60% of the total revenues in Bakkafrost (pre-merger). The VAP operation is based on contractual sale and hence reduces the fluctuations of the Group’s financial performance through a business cycle. In order to meet customers’ demands, it is important to deliver high-quality products and a wide range of products.
Bakkafrost will continue to invest in state-of-the-art process equipment in order to meet the market demands on both product quality and new products. The Group will continue optimising the product portfolio in order to maintain the flexibility of the production between VAP and other products.
The merger between Bakkafrost and Vestlax as of 1 January 2010 and the acquisition of Havsbrún in 2011 will give new opportunities for growth through increased utilisation of farming locations and increased raw material base for processing. The Group will be better positioned to meet the large volumes requested by both new as well as existing customers within the retail sector, build long-term relationships and, at the same time, be able to benefit from opportunities within the spot market or explore new opportunities.
Since the new veterinary model was introduced on the Faroe Islands, Bakkafrost has demonstrated growth of 34% compounded annually growth in terms of harvest volumes. The management has targeted volume of 45,000 tonnes gutted weight production in 2012 on the existing facilities, representing a growth of 48% compared to the harvest volumes in 2009. Further growth on existing facilities has to be evaluated after learning how the biological performance develops at this volume.
Bakkafrost owns 50% of the licences today and the regulations do not allow any company to own more than 50% of the licences.
The Group also considers acquisitions outside the Faroe Islands as an opportunity for further growth. Currently, there are no such plans, but the management believes that the operating model conducted on the Faroe Islands will be equally successful in other geographic locations with favourable naturally-given conditions and will consider such opportunities when the timing is considered to be right.